Stabilization fund

Stabilization fund Definition

A stabilization fund generally refers to a mechanism set up by a government or central bank to insulate the domestic economy from large influxes of revenue, as from commodities such as oil. A primary motivation is maintaining a steady level of government revenue in the face of major commodity price fluctuations (hence the term "stabilization"), as well as the avoidance of inflation and associated atrophy of other domestic sectors.

Additional meaning of Stabilization fund:

This generally involves the purchase of foreign denominated debt, especially if the goal is to prevent overheating in the domestic economy. May overlap with sovereign wealth fund.